ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Awoke Mitku, Gutema Kajela Ejeta and Debora Belachew, Mehrteab & Getu Advocates LLP
closure of several documents; therefore, these transactions may take longer than private merg - ers. 6.2 Mandatory Offer Threshold The Commercial Code of Ethiopia provides a mandatory offer threshold: 50% or more of the capital of a target company. Therefore, any person who intends to buy shares representing 50% or more of the capital of a target company shall make a tender offer to all remaining share - holders of the company. This gives the remaining shareholders the opportunity to sell their shares to acquirers when control of the target company changes hands. This threshold applies to private M&A. In public M&A, a bidder who acquires, directly or indirectly, more than the required majority per - centage of the shares admitted to trading of a listed company shall – within 30 days from the date of acquisition – submit an offer to purchase all the remaining shares traded in the exchange. The ECMA is mandated to issue a directive determining the majority percentage of the shares admitted to trading of a listed company, but this directive has not yet been enacted. 6.3 Consideration Cash is the most commonly used consideration in M&A in Ethiopia. The most commonly used tools to bridge value gaps between parties are the earn-out arrangement, equity rollover and vendor take-back loan. 6.4 Common Conditions for a Takeover Offer In the case of a private takeover offer, com - mon pre-requisites for the transaction include the seller obtaining the necessary regulatory approvals, tax clearance and certain other legal
requirements. There are no restrictions on the use of offer conditions. However, there are no common conditions in the case of a public takeover offer, as such takeo - vers are not yet practiced in Ethiopia. The rel - evant capital market laws do not restrict the use of offer conditions, but the offer should comply with these laws, including with respect to the application fees and obtaining prior approval from the ECMA. 6.5 Minimum Acceptance Conditions In Ethiopia, there is no regulation that provides minimum acceptance conditions obliging the bidder to acquire a certain number of voting rights in the target company. 6.6 Requirement to Obtain Financing The bidder is not required to obtain finance for a business combination. However, the target can contractually require the bidder to obtain finance for the transaction. For legal purposes, as far as the necessary permits and approvals are secured for the transaction, the bidder is not required to obtain finance for completing a busi - ness combination. 6.7 Types of Deal Security Measures Parties typically include some deal-protective measures in their definitive agreement. A break- up fees clause, lock-up agreement and no-shop clause are common deal security measures that a bidder may seek. There are no changes to the regulatory environment that have impacted the length of the interim period. 6.8 Additional Governance Rights If the bidder does not want to acquire 100% ownership of the target company, it can try to acquire other governance rights, such as deci - sion-making power in some reserved matters
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